OptiNose Inc (OPTN) 2021 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Optinose Q3 2021 Earnings Call. (Operator Instructions) I would now like to turn the call over to your host, Jonathan Neely, VP, Investor Relations. You may begin.

Good morning, and thank you for joining us today as we review Optinose's third quarter 2021 performance and our plans for the remainder of the year. I'm joined today by our CEO, Peter Miller; our President and Chief Operating Officer, Ramy Mahmoud; and our CFO, Keith Goldan. The slides that will be presented on this call can be viewed on our website, optinose.com in the Investors section. Before we start, I would like to remind you that our discussions during this conference call will include forward-looking statements.

All statements that are not historical facts are hereby identified as forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated by such statements. Additional information regarding these factors and forward-looking statements is discussed under the cautionary note on forward-looking statements section of the earnings release that we issued last night as well as under the Risk Factors section and elsewhere in Optinose's most recent Form 10-K and Form 10-Q that are filed with the SEC and available at their website, sec.gov and on our website at optinose.com.

You are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements during this conference call speak only as of the original date of this call or any earlier date indicated in such statement, and we undertake no obligation to update or revise any of these statements. We will now make prepared remarks, and then we will move to a question-and-answer session.

With that, I will now turn the call over to Peter Miller. Peter?

Thanks, Jonathan. Good morning, everybody. We appreciate you joining us today. We have important information to share regarding our commercial and clinical progress in third quarter, our expectations for full year 2021 and a comprehensive plan to address our financial profile that we announced last night and updated this morning. However, I'd like to start today by providing perspectives regarding the longer term potential for our business because there are significant clinical milestones in the first half of 2022 that I believe create an imperative to first appreciate the business we have today.

And second, understand how approval of XHANCE as the first ever FDA-approved drug treatment for people with chronic sinusitis could create significant new opportunities and the magnitude of those opportunities. Turning to slide 4; we believe the potential for our business as it exists today is attractive. Today, we promote XHANCE for its current indication of nasal polyps to an audience of largely ENT and allergy specialist physicians. Nasal polyps is an indication for which up to approximately 1 million diagnosed patients are treated annually.

In our target audience, despite continuing challenges created by COVID-19 environment, XHANCE continues to be a growth brand, expected to produce $71 million to $75 million in net revenue for full year 2021 or growth of 47% to 55% compared to full year 2020. And there are factors that we believe will continue to support growth, including a leading target physician preference share and substantial headroom in our market share. Our current efforts continue to drive adoption of XHANCE, and there is early recognition in our target physician audience of the important role XHANCE can play in a logical step-care paradigm for patients with nasal polyps.

Turning to slide 5. If we are successful in developing XHANCE as the first FDA-approved drug treatment for chronic sinusitis, our business will have multiple new opportunities for growth, each of which is significantly larger than the current market opportunity. Promotionally, we continue to produce strong growth and have succeeded in achieving a leading position preference share for XHANCE among our target audience for treating patients with nasal polyps. Although XHANCE is already used off-label by some physicians for chronic sinusitis, we are not permitted to promote its use for this indication, and some payers limit coverage to nasal polyps.

There is abundant headroom in market share to support strong continued growth. However, these dynamics highlight substantial future opportunity with a new CS indication. Notably, without changing the size or deployment of our current sales force and without disrupting current physician relationships, a chronic sinusitis indication would have potential to triple the number of patients for whom we actively promote XHANCE. Going a bit deeper, today, we promote XHANCE for nasal polyps to ENT and allergy specialist physicians. That is an indication for which approximately 1 million diagnosed patients are treated each year.

In our target universe, we have established a leading physician preference share for XHANCE for nasal polyps and the strong positive physician preference in the nasal polyp population is important for the specialty business we are building. The future opportunity for Optinose within the specialty business is that there is a much larger total number of patients, approximately 3 million who have either nasal polyps or chronic sinusitis and who are also being treated by specialty physicians. Successful development in CS would enable us with our current sales infrastructure to extend the physician preference share we have successfully established in nasal polyps to this greatly expanded patient population.

It would also enable us to pursue importantly expanded insurance coverage based on the new first-in-class approval as the only drug indicated for chronic sinusitis. Based on our experience and on electronic medical record data, we believe that many physicians can more readily diagnose chronic sinusitis than nasal polyps. In an insurance environment where some payers ask physicians to attest their patients that are being treated for the indication on the label, the value of label expansion is not just in promotion. It is a factor that has potential to open prescribing by physicians who want or need the label to match with a diagnose to satisfy the demands of payers.

Turning to slide 6. In addition to the major growth opportunity that would be created in our specialty business, we have found that there are potential partners that have a primary care promotional infrastructure and current sales deployment that already has a high audience cross match with XHANCE targets. These partners could efficiently expand promotion of XHANCE to reach up to 30 million patients. That is because there are an incremental 6 million to 7 million patients with chronic sinusitis currently treated in primary care.

We believe this is a particularly receptive setting where today, a primary care physician has few options other than referral for patients who continue to have symptoms on generic nasal steroid treatment. Further, there are an additional 20 million lapsed patients that could be activated. More specifically, for the 6 million to 7 million patients that are currently being treated in primary care, we believe there are 50,000 to 60,000 primary care physicians with high potential value as targets. We analyze the overlap of these physicians with current sales efforts of potential partners and believe that there are multiple organizations that could create substantial value for both themselves and Optinose through partnering. In addition to the opportunity created by the 6 million to 7 million patients currently treated in primary care, I alluded to approximately 20 million patients who are believed to know they have chronic sinusitis symptoms, but who've stopped seeking regular care from a physician for nasal symptoms.

A novel chronic sinusitis indication could enable activation by a primary care partner of these dissatisfied but lapsed patients through direct-to-consumer promotion. Turning to slide 7; one of the reasons we are highlighting CS today is the top line results from ReOpen1 and ReOpen2, our 2 chronic sinusitis pivotal trials are expected in the very near term. In fact, it is possible that top line results from ReOpen1 will be available to announce before our next call when we announce our fourth quarter and full year 2021 earnings. With the recruitment phase for both trials behind us, our clinical team is now focusing on successful completion of both trials and plans to have top line results from ReOpen1 in the first quarter of 2022 and ReOpen2 in the second quarter of 2022.

Turning to slide 9. With respect to our Q3 2020 performance, I would like to highlight 4 key takeaways from today's presentation. First, consistent commercial execution drove strong year-over-year growth in the third quarter 2021. Across the board on revenue, prescriptions and our top physician prescriber segment, XHANCE delivered strong double-digit growth rates. Despite the strong continued growth, I'd like to note that the pandemic related environment is continuing to limit growth that we believe would have otherwise -- that we otherwise would be achieving. Most notably, restrictions are continuing to meaningly limit sales territory manager access to target physician offices.

That is why we believe volume trends, particularly in our fall season of September and October did not emerge as anticipated. That is why we are adjusting guidance today for the full year of 2021. Keith will have more about that later. Second, there are factors that we believe will support continued growth of XHANCE. For example, as I referred to earlier, there is an increasing recognition in our target physician audience of the important role XHANCE can play in a step-care paradigm for nasal polyps. The consensus algorithm published in a major specialty journal, IFAR, by a panel of experts this past June has featured prominently this fall in discussions with our target audience.

Increased patient flow and improved physician access are still potential drivers for future growth. Market conditions have improved this year over 2020, but the number of diagnostic visits by patients to ENT and allergy offices and as I just mentioned, our sales representative access to those physician offices remain below pre-pandemic norms. Although the future is not entirely clear, we believe our specialty physician environment will slowly improve with respect to both patient volumes into physician offices and with respect to our representatives' access to those physicians. Given the historical high promotional response we have seen with XHANCE, we believe this could be beneficial in driving future growth.

Another example of the fact that we believe will support future growth is potential for improvement in the average number of prescriptions sold per year because of the refinements we continue to make to our co-pay assistance program. Third, we are adjusting our financial guidance for full year 2021. While lower than previously expected, the year-over-year growth rate implied by the new range for XHANCE full year net revenues remains robust, ranging from 47% to 55%. The changes we are making reflect current business conditions with ongoing pandemic-related business influences. Again, Keith will have more on financial guidance later in the presentation, including changes that mitigate the operating income and cash effects of the new revenue range.

And fourth, getting both chronic sinusitis trials enrolled was a key objective for our organization this year. As highlighted earlier, we successfully completed that objective and are on track for top line data in Q1 and Q2 '22.

Turning to slide 10. We had strong performance in the third quarter 2021, and I will briefly touch on year-over-year growth highlights on this in the next slide. In the third quarter 2021, there were approximately 27,900 new prescriptions for XHANCE, a 22% increase compared to third quarter 2020, while the market increased only 9% over the same period. We remain pleased with the relative strength of new XHANCE prescriptions.

What is important is that in addition to increasing the number of new prescriptions, we've also improved the quality of our new prescriptions due to changes in our co-pay assistance program. This has increased the proportion of covered patients filling first prescriptions, which has improved average revenue per prescription. Covered patients also tend to have higher refill rates, a benefit to take some time for us to realize, but we are seeing signs of improvement there as well. The total number of XHANCE prescriptions in the third quarter of 2021 was approximately 86,300. This represents 25% growth over the third quarter of 2020 in a market environment, which increased only 4% over the same period.

Turning to slide 11. XHANCE's market share increased from 4.9% in the third quarter of 2020 to 6% in third quarter of 2021. As market volumes potentially grow in the future, we are focused on holding on to and continuing to grow our market share. Breadth and depth of physician prescribing, as measured by the total number of physicians who have patients filling XHANCE prescriptions and the numbers of prescriptions filled for writing physicians, respectively, increased from third quarter 2020 to third quarter 2021 as well.

Regarding breadth, in third quarter 2021, approximately 7,200 physicians had a patient fill at least one prescription of XHANCE, an increase of 12% compared to third quarter 2020. Regarding depth, the number of physicians who had more than 15 XHANCE prescriptions filled by their patients in the quarter has grown even faster with that number increasing by 27% from third quarter 2020 to third quarter 2021, with more than 1,400 physicians now in this segment.

In a few moments, I'll provide some closing remarks, but I will first turn the call over to our CFO, Keith Goldan, for comments regarding third quarter 2020 results and perspectives regarding our corporate guidance.

Thank you, Peter, and thanks to everybody for joining us this morning. Turning to slide 13; as we reported, Optinose recognized $21.8 million of XHANCE net revenue this third quarter, an increase of 41% compared to the third quarter of 2020. Year-to-date 2021 XHANCE net revenue stands at $51.1 million, an increase of 56% compared to the 9 months ended September 30, 2020. Turning to slide 14; based on available prescription data purchased from third parties and also on data we received directly from our preferred pharmacy network, XHANCE average net revenue prescription for the third quarter of 2021 was $253, an increase of 13% compared to $224 of revenue per prescription in the third quarter of 2020.

Year-to-date, 2021 average net revenue per prescription is $211 and reflects an increase of 21% compared to $175 for the 9 months ended September 30, 2020. We believe year-to-date is a better measure for evaluating long-term performance, and so I'll focus on that for a moment. We believe the 21% increase in year-to-date revenue per prescription is driven in large part by changes earlier this year to our co-pay assistance program. The absence this year of the onetime assist program that was available to patients in the second and third quarters of 2020, also contributes to the year-over-year increase.

The changes to our co-pay assistance program are important going forward as they are intended to increase ongoing revenue per prescription by reducing the rate of growth in prescriptions filled by commercially insured patients and plans that do not cover XHANCE, while sustaining the growth rate in covered plans. We believe the change has had the targeted effect, and we expect the benefits to revenue per prescription to continue going forward. Turning to slide 15; we are changing our financial guidance for full year 2021. The totality of the changes will result in similar use of cash through 2021 as we prepare for significant clinical trial data readouts in the first 2 quarters of 2022.

First, as Peter noted, we are continuing to be negatively influenced by the impact of the COVID-19 pandemic on XHANCE prescription growth and the resulting net revenues, most notably with respect to restrictions and limitations on territory manager access into physician offices and patient flows, which remain below pre-pandemic norms. Although a negative impact today, improvement in these areas is a potential driver of future growth. Based on the second half market and promotional environment we've experienced to-date, we now expect XHANCE net revenue will be between $71 million to $75 million for full year 2021.

I will note that this year-over-year growth -- that the year-over-year growth rate for the fourth quarter of 2021 implied by that range is 27% to 53%. Second, with respect to XHANCE net revenue per prescription, we are increasing our expectations for full year 2021. We now expect XHANCE net revenue per prescription to exceed $210. Previously, we expected full year 2021 to exceed $200. As discussed, we are confident that the changes we made to our co-pay assistance are having the intended effects in driving sustainably more profitable prescription growth.

Finally, for full year 2021, we now expect total operating expenses to be lower in the range of $132 million to $137 million, of which approximately $10 million is expected to be stock-based compensation. Total operating expenses, excluding stock-based compensation, are therefore expected to be in the range from $122 million to $127 million. The $5 million decrease in expected full year operating expenses is primarily a result of lower volume-based third party costs, combined with reductions in other general and administrative expenses.

Turning to slide 16. We've experienced strong growth rates in our business, and we are taking steps to add cash to our balance sheet and revise the terms of our outstanding debt. Terms which were, broadly speaking, prior to the COVID-19 pandemic and under very different assumptions about the business conditions in both 2020 and 2021 that affected the promotion and sale of XHANCE as well as our ability to recruit our Phase IIIb chronic sinusitis trials. This morning, we announced the pricing of an offering of Optinose common shares that upon closing will produce $40 million of gross proceeds.

Upon the closing of the offering, the minimum trailing 12-month XHANCE net product sales covenants associated with our outstanding debt will be reduced. You can see the new covenants on the slide for reference. Some of the changes over the next 5 quarters include reductions from $80 million to $68 million for the 12-month period ended December 31, 2021. From $90 million to $70 million for the 12-month period ended March 31, 2022, and from $106.25 million to $90 million for the 12-month period ended December 31, 2022. Also effective upon the closing of this offering, the debt modification will allow for a 9-month extension in the interest-only period alone from December 2022 to September 2023.

I'll now turn the call over to Ramy to discuss our development programs.

Thank you, Keith. Turning to slide 18. Regarding the 2 pivotal trials, which comprise our chronic sinusitis registration program, I'd first like to share that in October we completed recruitment for the second trial, Study 3206 or ReOpen2. With recruitment complete in both trials, we are firmly on track to deliver topline results from ReOpen1 and ReOpen2 in the first and second quarters of 2022, respectively. I'd like to thank our clinical team, our participating investigators and our other partners for their efforts, particularly in the face of the unique challenges created by the pandemic.

They made it possible to successfully complete recruiting for both trials. Most of all, I'd like to thank the patients that are participating in this important research as we seek to develop the first ever FDA-approved medicine for the treatment of chronic sinusitis. Second, I'd like to remind you that we previously reported having performed a preplanned blinded interim analysis to compare the observed variance in the co-primary endpoints from Study 3205 or ReOpen1 to the variance that had been assumed during initial trial design. In the third quarter of this year, we performed similar analyses for Study 3206 or ReOpen2.

These analyses were similarly intended to assess whether the variance assumptions in our a priori sample size calculations were consistent with the actual variance observed in the trial. The analyses were performed on blinded interim data from patients for whom full data was available. For the composite score of nasal symptoms, data was available for approximately half of patients projected to complete the study and for the average percent of pacification of volume by CT scans that was available for approximately 1/3 of the patients that are projected to complete the study.

The difference in data availability is primarily accounted for by one endpoint being observed at 4 weeks, while the other isn't captured until 24 weeks. The result was that the observed variance for both endpoints was lower than the variance that had been assumed for the purposes of sample size estimation during the initial study design. Given this result, we reduced sample size from 399 to approximately 210 patients in trial 3206, while maintaining our full originally targeted statistical power for the final analysis.

I'll now turn the call back over to Peter for closing remarks. Peter?

Thanks, Ramy. Before moving to Q&A, I'll take a moment to reiterate that overall, we're pleased with the progress we have made in third quarter of 2021 and are laser-focused on continuing to grow XHANCE and on completing our chronic sciences trials. Thank you.

And I'd like to open the call for Q&A.

(Operator Instructions) Our first question comes from Gary Nachman with BMO Capital Markets.

First, just based on your revised full year guidance of $71 million to $75 million, 4Q could potentially be down at the lower end of it sequentially. So just a little bit more, Peter, on why that would be -- are there also some dynamics with inventory drawdowns or something specific, Keith, with net revenue per prescription in the fourth quarter that we should consider? Because I thought those are actually -- should be seasonally higher and up sequentially. And then I have a couple of more.

I mean, Gary, I'll start and I'll then let Keith jump in. But if you take the midpoint of the range, we are going to have growth in fourth quarter this year of about 40% versus fourth quarter last year. And what we do see, you've seen our prescription trends, we feel good about how we're growing the business right now. We do have some price dynamics that come into play in December that I'll let Keith talk to. So Keith, I'll let you pick it up.

Yes. And I just -- in addition to the -- Peter kind of called out the midpoint of the range represented about 40% growth year-over-year. I'll also comment that at the midpoint of the range, it's greater than 50% growth full year -- over full year. So that'll be the first point. Second, the -- what Peter was just referring to, there are -- you know Gary, in the beginning of every year in January, we typically see what we call the year beginning effect, where we -- patients' high deductible resets, as well as out-of-pocket max's reset.

And because of that, we contribute more to their co-pay assistance. So as has been the case in 2020, 2019 and probably will be the case going forward, we see a lower average net revenue per prescription in the first quarter. So that means as we anticipate that and we value our inventory that we anticipate is in the channel in the fourth quarter, we have to revalue that inventory at what we expect to receive for that inventory when we sell it. So that causes some pricing pressure every December and again, that's not an Optinose effect, that's a pharma industry effect.

So Gary, I'd sum it by saying with respect to Q4, we believe net revenue per prescription is more likely to decrease sequentially, and the prescriptions are more likely to increase from Q3.

Okay. That's helpful. And then, I guess, what's the level of in-person detailing now coming out of the pandemic? It's obviously hampered, but to what extent? And maybe talk about how the Kaleo co-promote is helping? And as you're cutting back expenses, are you actually making any changes to the sales force at this point or you're really trying to keep it intact to sort of benefit from when we fully come out of the pandemic hopefully soon?

So Gary, on the first question, relative to rep access, Gary, it's hard for us to have exact numbers for this. In some of the regions, based on the reps I talk to, you see access only about 50% of what it was pre-pandemic. So there's just no doubt that despite real changes in the environment that we all see, we're just not seeing the same level of change in rep access to physician offices that we anticipated, frankly. So that's relative to the first question.

Relative to Kaleo, Gary, and this was released in our Q. We mutually agreed to terminate that agreement effective December 31, 2021. The issue here was largely we expected recovery of pre-pandemic relative to rep access, and we just didn't see that with the Kaleo reps in terms of their access to physician offices. So we made a decision that's in the best interest of both parties to terminate that.

Relative to our sales deployment, we feel very good about our deployment right now. The thing we know is we have a very promotionally sensitive brand that continues to be very true. When we make calls on doctors, we see real benefit in terms of promotional response. So no changes relative to our reps and -- with the environment does see improvement, we think we can benefit from that improved environment.

Okay. And then my last question. Ramy, it sounds like you feel pretty confident, I guess, as confident as you could be given how enrollment has gone for the 2 CS studies. So -- why are you guys raising equity now in front of that data, we're not that far off? I mean, it sounds like it might be related to the debt and the covenants, but maybe you just want to elaborate on the timing of that a little bit more.

Yes. Gary, this is Keith. If I could take that one. I think you hit the nail on the head. The Pharmakon amendment that we announced this morning was contingent upon the closing of its financing. But that said the additional cash definitely strengthens our balance sheet as we move into the -- 2 pivotal data events in the first quarter and second quarter of next year.

And, Gary, I'll say -- Ramy can jump in, but there's no new information about success or likelihood of success of the trials, so it was -- this raise was done, as Keith said largely because of the issue Keith mentioned relative to the Pharmakon debt agreement.

Okay. But I just want to make sure I heard correctly, Ramy that you said that you did lower the number of patients that you had to enroll because of the interim analysis. So I mean, I guess, that's a positive signal.

Yes. So as Peter said, we really don't have new information that informs the likelihood of success of the trial. But we were able to lower the sample size while maintaining the fully estimated -- the fully planned, originally estimated power to detect the difference in treatment. So it's good that we were able to do that and that's what gives us confidence that we can complete the trials and produce top line results in the timeframes that we just talked about.

Our next question comes from David Amsellem with Piper Sandler.

So I just had a few. So Peter, you had mentioned that some plans were restricting coverage to patients with nasal polyps. I was wondering if you could elaborate on that. How widespread is that and is that become more widespread as the footprint of XHANCE has grown? Just wanted you to touch on that. And then secondly can you, and I apologize if I missed this, can you just talk about the mix between polyp and non-polyp patients currently and how that's trended? And then I have a couple of follow-ups.

Yes. What I'll say, David -- thanks, David for the questions. And relative to the nasal polyp restrictions, you know from our prior calls that we really have very good commercial insurance coverage. 80% roughly is our commercial insurance coverage. And while the majority of the plans don't have a prior authorization in place, we do have prior authorization in place with a reasonable number of our prescriptions by the payers. And as I mentioned in the call, David, we are seeing a situation that some payers and I want to be clear, it's not all payers, it's not all plans, but some payers do require an attestation, if you will, by the physician that the patient has nasal polyps. And we're finding that that's limiting a bunch of physicians who if not for medical reasons that they're not writing broader.

And I want to be clear we'll never promote off-label. So we are only promoting based on the nasal polyp indication. But because of these payer issues, we believe there are a large -- reasonably large number of group of physicians that are not -- that are limiting the use of nasal polyps. And the point I'm making that, David, is that -- and I said it in the script but I'll reiterate it, we have a nice business in this current market. There's roughly a million patients who are diagnosed with nasal polyps. You guys know that we get 4 prescriptions per patient per year and about $200 net revenue per patient.

So the TAM, so a value of $800 per patient per year has a million patients, you have an $800 million TAM in the nasal polyp only-diagnosed patient population and we're building a nice business there. But it does highlight the real potential value of the CS indication that it's positive, would -- not only would be -- we would be the first product approved for CS, that's a very strong efficacy message, but it -- this issue was significantly mitigated relative to the payer issues. Regarding your second question, Dave, I'll turn it Ramy to talk about sort of where prescribing is today relative to on-indication and off-indication.

Right. So all of our promotion is, of course, on-label. We have a healthy skepticism about IQVIA data, about the indication for which the product is used. There's some challenges to capturing that kind of distribution. Having said that, we know that with nasal polyp promotion, there's a subset of doctors -- and you saw that on our earlier slide -- who will choose to use the product broadly and those are the earliest adopters, and they give a certain sort of distribution across diagnoses.

As we grow the product and expands to a larger and larger number of physicians, we are encountering more and more physicians who don't feel the same way about the breadth of prescribing that they choose to use for the product. So the impact of the constraint by indication becomes more evident in the larger population of doctors beyond that. And So the shift in prescribing proportions by indication will become more evident as we have more and more prescribers.

Okay. That's helpful. And then, if I may just sneak in another question. Just with the raise this morning, and I know you had -- you explained the rationale, but I wanted to sort of ask a hypothetical to the extent that the non-polyp study they're successful. There's obviously going to be some commercial implications there. Can you just talk about your cash runway in the wake of this raise? How you're thinking about spend on the commercial organization? Obviously, you thought about potential co-promote. But just help us understand the road ahead, particularly with this morning's raise.

Yes, David. This is Keith. I'll take that. Good to talk to you this morning. I'll make a couple of comments. First, I'll refer back to something that Peter said earlier in his comments, and that is that we think for the specialty business that our company is focused on, the ENT/allergy that we're appropriately sized today. I'll emphasize that point by saying if you look back over our operating expenses, sales and marketing, G&A, R&D over the last 3 years, it's relatively consistent. So we're getting additional leverage off of a fixed infrastructure every year that we continue to grow XHANCE.

Including this year, our midpoint of the range just over 50% growth year-over-year in an environment, which Peter mentioned, we're still seeing some pretty significant restrictions. The second point I'll make, and we commented on this in our second quarter earnings call in August, is that we have significant cost over the past few years that have been focused on the conduct of our Phase IIIb clinical trial seeking the indication expansion for XHANCE into chronic sinusitis. We are completing -- our guidance is that we are to complete the in-patient portion of those trials in the first half of the year.

We'll obviously have costs in the second half of the year, including medical writing, the PDUFA fee to -- as we get ready to submit the sNDA, but on a go-forward basis, we don't have a clinical program behind the CS indication for XHANCE, such that one could see a change in our P&L and a reduction in those R&D costs on a go-forward basis. So hopefully, I've answered your question in a roundabout way, we don't provide specific cash guidance, but hopefully that paints a picture of how we're thinking about it.

The next question comes from David Steinberg with Jefferies.

Couple of questions. The first thing is you guys have talked about this new algorithm that you thought could really accelerate the utilization of XHANCE. Is that -- has that started yet? Is it having any impact or do you see the impact coming next year? And then, secondly, in the last call, you guys are really optimistic about securing corporate partnership. I can't recall the exact words, but it seems like there was a lot of interest. Are you still seeing the same high interest level in a partnership for GPs assuming the data is good in the CS indication?

Yes, Dave. I'll take both of those. Nice to hear from you this morning. Relative to the algorithms, as you're aware, it was published in the June timeframe. You know that summer is a little bit more difficult normally in terms of promotionally with doctors because of vacations of reps and doctors. So the fall is when we really geared up relative to broad dissemination to doctors of the algorithm. We did stuff by the way in June and over the summer. And there's no doubt, David, we're seeing impact but it's going to take some time for that as we get to doctors.

We are again limited because of the pandemic. Our reach is not as broad in the physician audience that we had anticipated but I have no doubt that it's going to continue to be something that really could help us grow the business in the current footprint that we have. It is, by the way, we've seen real nice gains in our preference share, which is market research of doctors' interest in writing the product for patients with nasal polyps. So that has -- that takes a little bit while to translate into prescribing but I'm feeling very good about that document and the ability to continue to drive awareness of it. Relative to partnership, I still remain very optimistic of a partnership.

So nothing's changed there. As I mentioned on the call, there are multiple pharmaceutical companies that have deployment already against the doctors that we believe are going to be high prescribers of XHANCE with the CS indication. So yes, I feel very good about it. You probably noticed, David, typically deals are done post data. So I wouldn't read into that -- anything relative to timing. But as I said, I continue to feel very good that if we are to get positive data, we feel very good about the possibility of a partner in primary care.

And just to follow-up, typically partnerships can often give companies non-dilutive financing, certainly -- whether it's an equity stake or an upfront or more upfront and lower back-end. So just curious, vis-a-vis the equity raise you just did, I mean, you basically have diluted the shares about 50%, which is really meaningful dilution. So I guess my question is, if you've had a number of companies who are interested and you've done the due diligence, even though the data is not out yet, wouldn't have some sort of partnership been much better for the P&L of the company than 50% dilution? Or were you about to face covenants that were tripped and you basically had to do it near-term?

I mean, David, I'll take the (inaudible). I want to clarify first that the dilution is about 1/3. So I want to be clear on that, 25 million shares issued roughly. So relative to things that we considered, Keith mentioned that we believe the raise now was important to deal with the -- to revise the debt covenants, the revenue covenants that we have with Pharmakon and the overall Pharmakon agreement. And I'm not going to comment, David, on how we weighed potential partnering discussions and how that played into it other than, as I said, we feel very good about productive discussions with partners. You can imagine there's a real trade-off that you make relative to potentially encumbering the asset pre-data. There's a lot to be considered that goes into a decision on the partnering front. And as I said, I feel very confident that we got a partnership. I think this raise was something we felt we had to do now and we feel very good about the long-term prospects.

Isn't it 50% dilution, 50 million shares, 25 -- and 25 million on top of it?

Well, yes, I'm sorry, David. It depends on how you think about it. I guess I was thinking of it as the denominator being ultimate shares that are ultimately outstanding as opposed to free.

The next question comes from Ken Cacciatore with Cowen.

Along similar lines, it's -- you all are kind of single product company. It's going to be tough even if you partner to really leverage that sales force and spending. And you did choose to do the equity offering now. Just trying to understand the thought process behind staying standalone and to what degree this upcoming review and hopefully great data and then picking a strategic partner?

What would be the impetus to stay standalone at this point? Not sure how you would leverage your own sales force. Maybe we're jumping the gun. We have to see the data. But want to hear you talk about really at this point maximizing shareholder value and getting this product into as many hands as you can, would seemingly be better with someone else than with yourselves.

I mean, I'll say this, Ken. I mean, we're going to evaluate in a positive trial scenario and by the way, in a negative data scenario that we don't expect, by the way. We think there's reasonably good chance of positive data scenario. We're going to look at all options, Ken, is what I'll tell you. We'll look at strategic options. We'll look at other options, but the thing that is clear in your question is that we have to find a way to create a greater leverage of the organization, on both sales force and infrastructure. So I'll just stop there and say that it's absolutely something that will be considered. Obviously, I talked a lot about the potential opportunity that CS opens up both in our ENT/allergy audience, as I said, 3 times the number of patients who are being treated by the same number of doctors with our current footprint of sales force, and obviously the big opportunity in primary care.

And I'm not showing any further questions.

Yes, that's the end of questions. So I want to thank everybody for joining the call this morning. Appreciate the questions and we look forward to our next call.

Ladies and gentlemen, so that concludes today's presentation. You may now disconnect and have a wonderful day.